Unit study guide · NISM Series X-A
Evaluating the Financial Position of Clients
5 questions in this unit
What this unit covers
- A household receives ₹90,000 a month after tax. Regular monthly living expenses are ₹54,000 and loan instalments are ₹16,000. An insurance premium of ₹72,000 is payable annually. After making an equal monthly provision for that premium, what amount remains available each month for additional saving?
- A client chooses an emergency-fund target of exactly six months of essential outgo of ₹45,000 a month. The amount already earmarked for this purpose is ₹1,80,000. What is the shortfall?
- CASE: A household has a savings balance of ₹2,40,000, fixed deposits of ₹3,60,000, mutual funds of ₹9,00,000 and a house worth ₹50,00,000. It owes ₹20,00,000 on a housing loan and ₹1,00,000 on a personal loan. What is its net worth?
- CASE: A household earns ₹1,20,000 a month after tax. It spends ₹45,000 on essentials, pays loan instalments of ₹25,000 and ₹5,000, and sets aside one-twelfth of a ₹60,000 annual insurance premium each month. What is its monthly surplus before new investments?
- CASE: A household's emergency-fund target is six months of essential outgo. Monthly essential outgo is ₹45,000 of living costs, ₹30,000 of loan instalments and a ₹5,000 insurance provision. Only its savings balance of ₹2,40,000 and fixed deposits of ₹3,60,000 count. How does the eligible amount compare with the target?
Key ideas
From the practice bank · 1
A household receives ₹90,000 a month after tax. Regular monthly living expenses are ₹54,000 and loan instalments are ₹16,000. An insurance premium of ₹72,000 is payable annually. After making an equal monthly provision for that premium, what amount remains available each month for additional saving?
₹14,000 deducts all stated budget items once. Monthly provision for insurance = ₹72,000 ÷ 12 = ₹6,000. Total budgeted outgo = ₹54,000 living expenses + ₹16,000 loan instalments + ₹6,000 insurance provision = ₹76,000. Income of ₹90,000 less ₹76,000 leaves ₹14,000 for additional saving. The provision is counted once, not in addition to a duplicate annual charge in the same monthly calculation. Remember: Convert predictable non-monthly expenses to the budget’s time unit before calculating spare cash.
Hint Common mistake: Calling cash left in a non-premium month fully investible while ignoring an annual bill that still has to be funded.
X-A-017From the practice bank · 2
A client chooses an emergency-fund target of exactly six months of essential outgo of ₹45,000 a month. The amount already earmarked for this purpose is ₹1,80,000. What is the shortfall?
₹90,000 is the difference between the target and the amount already earmarked. Required coverage in this scenario is six months, with essential monthly outgo of ₹45,000. Target = 6 × ₹45,000 = ₹2,70,000. Already earmarked = ₹1,80,000. Additional funding needed = ₹2,70,000 − ₹1,80,000 = ₹90,000, equal to two more months of the stated outgo. Remember: Keep the target, existing eligible resources and incremental gap as three separate amounts.
Hint Common mistake: Presenting the example’s six-month choice as a universal compulsory or regulatory threshold.
X-A-018From the practice bank · 3
CASE: A household has a savings balance of ₹2,40,000, fixed deposits of ₹3,60,000, mutual funds of ₹9,00,000 and a house worth ₹50,00,000. It owes ₹20,00,000 on a housing loan and ₹1,00,000 on a personal loan. What is its net worth?
Net worth is assets minus liabilities. Assets = ₹2,40,000 + ₹3,60,000 + ₹9,00,000 + ₹50,00,000 = ₹65,00,000. Loans = ₹21,00,000. Net worth = ₹44,00,000. Remember: Earmarking money for a goal does not create a new asset to add to the balance sheet.
Hint Common mistake: Double counting the earmarked education money or omitting a self-occupied house solely because it is not readily spendable.
X-A-021From the practice bank · 4
CASE: A household earns ₹1,20,000 a month after tax. It spends ₹45,000 on essentials, pays loan instalments of ₹25,000 and ₹5,000, and sets aside one-twelfth of a ₹60,000 annual insurance premium each month. What is its monthly surplus before new investments?
₹1,20,000 − ₹45,000 − ₹25,000 − ₹5,000 − ₹5,000 = ₹40,000. The last ₹5,000 is one-twelfth of the ₹60,000 premium. Remember: Use the same period for all cash flows and distinguish pre-investment surplus from the balance after planned investments.
Hint Common mistake: Confusing an annual expense not paid this month with an expense that needs no monthly provision.
X-A-022From the practice bank · 5
CASE: A household's emergency-fund target is six months of essential outgo. Monthly essential outgo is ₹45,000 of living costs, ₹30,000 of loan instalments and a ₹5,000 insurance provision. Only its savings balance of ₹2,40,000 and fixed deposits of ₹3,60,000 count. How does the eligible amount compare with the target?
Target = 6 × ₹80,000 = ₹4,80,000. Eligible = ₹2,40,000 + ₹3,60,000 = ₹6,00,000. The fund exceeds the target by ₹1,20,000. Remember: An asset may count for net worth but not for an emergency-fund test with narrower eligibility.
Hint Common mistake: Applying a different definition of essential outgo or eligible assets from the one explicitly supplied.
X-A-023